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The restriction of Russian oil prices could shake the market – CNN

The Russian government earns as much money from energy exports as it did before the invasion. Meanwhile, inflation is rising globally, increasing political pressure on heads of state such as US President Joe Biden, British Prime Minister Boris Johnson and French President Emmanuel Macron.

“The goal here is to starve Russia, starve Putin of his main source of money, and lower the price of Russian oil to mitigate the impact of Putin’s war on the pump,” a senior U.S. administration official told CNN.

Why this is necessary: ​​European buyers have cut imports from Russia even before the bloc’s partial embargo takes effect. But rising exports to Asia have helped offset much of those losses. China, using large price discounts, imported 2 million barrels of Russian oil a day for the first time last month. Indian imports also rose, hovering close to 900,000 barrels a day in May.

Revenues from Russian oil exports rose by $ 1.7 billion in May to about $ 20 billion, according to the International Energy Agency. That’s well above the 2021 average of about $ 15 billion.

The United States could punish countries that continue to do business with Russia. But that would cause further chaos in the oil markets, something leaders desperately want to avoid as gasoline prices remain close to record highs.

If China and India had to find a replacement for Russian oil, the price of oil could easily exceed $ 200 a barrel, Darwei Kung, the commodity portfolio manager at DWS, told me. It is currently trading above $ 112 per barrel.

With price restrictions, barrels of Russian oil could theoretically still break into the global market, avoiding further supply cuts – but Moscow could not continue to make large profits.

The Biden administration has been lobbying for this option in recent days, and German officials have shown openness to discuss it. But key details remain vague.

What is missing: How, when and by how much the price of Russian oil could be limited remains to be seen. Officials said a precise mechanism for achieving the limits is still being worked out. It would also need broad international support to be effective.

One method could be to ban G7-based companies from insuring oil cargoes if customers pay above a certain price.

Still, Kung warned that adding complexity to energy markets could increase friction and make transactions more difficult, raising prices more than they would otherwise be.

“The more complicated the system, the more likely there are challenges for it,” Kung said. “[The] the market system works because it is in some ways very simple. It’s very effective. “

Shares are rising as investors reduce the Fed’s anxiety

The stock market this year has been driven by what investors think the Federal Reserve will do next, and whether they believe the central bank will be able to quickly bring inflation under control.

As the second quarter nears its end, some optimism is creeping in. The S&P 500 strengthened sharply on Friday, recording the largest one-day percentage increase in more than two years and breaking a three-week series of losses. The index rose again in pre-sale trading on Monday.

The jump followed the announcement of the University of Michigan finals reading consumer feelings for June, which fell to a record low.

But there was bits of good news. Long-term inflation expectations fell from a mid-month reading of 3.3% to 3.1%, a slight improvement.

Federal Reserve Chairman Jerome Powell said the initial reading in June was “eye-catching.”

That could mean the Fed doesn’t need to raise interest rates by another three-quarters of a percentage point at its next meeting. An increase of half a percent would still be aggressive, but it would not be so seismic.

However, much will depend on the upcoming data. The Fed’s favorite measure of inflation arrives on Thursday. If it is higher than economists predict, it could shake the bill once again.

What a reversal of Roe against Wade means for the economy

The decision of the US Supreme Court to annul Roe v. Wade is being sent political shock waves across the country as politicians and activists plan their next steps and protesters take to the streets.
This may not seem like a story for journalists covering the economy and markets. But the abolition of the constitutional right to abortion will have economic consequencesreports my CNN business colleague Anneken Tappe.

Families who are unwilling to raise a child could face financial difficulties, while mothers who have been forced to give birth may have difficulty accessing higher education or advance on the socioeconomic ladder. This would affect the workforce and economic performance, and could increase the need for state aid, economists say.

“This decision will cause current economic pain in 26 states where abortion bans are most likely and where people are already facing lower wages, lower labor power and limited access to health care,” said Heidi Shierholz, president of the Institute for Progressive Economic Policy. press release issued Friday. “The fall of Roe will be an additional economic barricade.”

This position was reiterated by Finance Minister Janet Yellen. In testimony before the Senate, she said restricting women’s reproductive rights would have “very detrimental effects on the economy.”

“Roe v. Wade and access to reproductive health care, including abortion, have helped increase labor force participation,” Yellen said. “It allowed many women to finish school. It increased their earning potential. It allowed women to plan and balance their families and careers.”

Following

Nike (FROM) reports on results after US markets close.

Also today: orders of durable goods for mail in May at 8:30 ET.

Coming Tomorrow: Investors will be combing U.S. consumer confidence data for June looking for signs that inflation could cause Americans to spend less.

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